What Is the Point of Having Terms?
A website or app’s terms are intended to form a contract between the company and its users. The terms define what the user and the company, each, will and will not do and are and are not allowed to do. The terms define the rights between the user and the company.
Oftentimes, the terms limit the company’s risk by prohibiting class actions or jury trials, or mandating arbitration of disputes. A user’s promise to give up these legal rights is only enforceable if the terms are found to be a contract between the user and the company.
How Will You Know if They Are Enforceable?
At the “big picture” level, ask if the user has agreed-to the terms. If the answer is yes, then the answer is probably. If the answer is “no,” then most likely they are not. For background on how the case law has been developing in this area, you can read more in an earlier article of mine.
The Ninth Circuit has further added to the case law on how to create enforceable terms in a case involved a smartphone app, Huuuge Casino, that allowed users to gamble with chips to play casino games. One of the app’s users downloaded the game from the Apple App Store and played the game for over a year. He then brought a class action lawsuit alleging that the app violated Washington state gambling and consumer protection laws.
HUUUGE, the maker of the app, sought to compel the player to arbitrate his claims based on the app’s terms, which contained a binding arbitration provision that also prohibited class actions. However, HUUUGE had not required users to affirmatively acknowledge or agree to the terms before downloading the app or at anytime while playing.
Even though HUUUGE did not require affirmative consent to the terms, the Ninth Circuit analyzed whether the user was on constructive notice of the terms. The Ninth Circuit reviewed the screen shots provided to the user before download and after and concluded that the user was not on constructive notice and, therefore, the terms were not enforceable. “When downloading the app – the Terms are not just submerged – they are buried twenty thousand leagues under the sea,” the Court wrote. Moreover, “[a]ccessing the terms during gameplay is similarly a hide-the-ball exercise.”
Echoing this author’s list of best practices, the Ninth Circuit concluded, “Huuuge chose to gamble on whether its users would have notice of its Terms. The odds are not in its favor.”
Although this case does not break new ground, the relevant law on how to implement enforceable terms continues to develop. Therefore, it is important to work with counsel on an annual basis to review your terms and how they have been implemented.